Western Digital 2013 Annual Report Download - page 85

WESTERN DIGITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Deferred Taxes
Temporary differences and carryforwards, which give rise to a significant portion of deferred tax assets and
liabilities as of June 28, 2013 and June 29, 2012 were as follows (in millions):
2013 2012
Deferred tax assets:
Sales related reserves and accrued expenses not currently deductible ............... $ 45 $ 61
Accrued compensation and benefits not currently deductible .................... 182 166
Domestic net operating loss carryforward ................................... 103 112
Business credit carryforward ............................................. 123 154
Long-lived assets ..................................................... 47 —
Other .............................................................. 71 90
Total deferred tax assets .............................................. 571 583
Deferred tax liabilities:
Long-lived assets ..................................................... (156) (191)
Other .............................................................. — (18)
Total deferred tax liabilities ........................................... (156) (209)
Valuation allowances .................................................. (133) (40)
Deferred tax assets, net ............................................... $282 $334
Deferred tax assets:
Current portion (included in other current assets) ............................. $160 $159
Non-current portion (included in other non-current assets) ..................... 411 424
Total deferred tax assets .............................................. 571 583
Deferred tax liabilities:
Current portion (included in other current assets) ............................. — (3)
Non-current portion (included in other non-current assets) ..................... (156) (206)
Total deferred tax liabilities ........................................... (156) (209)
Valuation allowances (included in non-current portion of deferred tax assets) ........ (133) (40)
Deferred tax assets, net ............................................... $282 $334
The net deferred tax asset valuation allowance was $133 million as of June 28, 2013. This $93 million increase
in valuation allowance was due to the passage of Proposition 39, which affects California state income apportionment
for most multi-state taxpayers beginning on or after January 1, 2013. This proposition reduces the Company’s future
income apportioned to California, making it less likely for the Company to realize certain California deferred tax
assets. The valuation allowance is based on the Company’s assessment that it is more likely than not that certain
deferred tax assets will not be realized in the foreseeable future.
In addition to the deferred tax assets presented above, the Company had additional NOL benefits related to
stock-based compensation deductions of $13 million and $33 million at June 28, 2013 and June 29, 2012,
respectively. During the current year, the Company generated an additional $25 million of benefits related to stock-
based compensation deductions. The benefits generated in the current year, along with $20 million of the benefits
related to prior years, were utilized in the current year. This $45 million was recorded as a credit to shareholders’
equity.
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